Recognized as key to achieving high-quality economic growth, businesses are increasingly acknowledged for their potential to drive green innovation, a transition integral to embracing sustainable practices.Despite the critical importance of this shift, the dual externalities of environmental and technological factors often dissuade companies from actively engaging in green innovation practices.While existing research has thoroughly explored the influence of external policy mechanisms, such as environmental regulations, government subsidies, green credits, and carbon emissions trading on promoting green innovation, the role of market-driven factors, particularly ESG rating divergence, has been less addressed.ESG ratings, essential components of the green finance ecosystem, are designed to catalyze economic transformation and aid in achieving dual carbon targets.These ratings, derived from publicly disclosed ESG information and the unique assessment models of rating agencies, serve as a crucial benchmark for external stakeholders to assess a firm's ESG performance.However, variations in evaluation criteria and disclosure practices among different rating agencies can lead to significant discrepancies in ESG ratings.Such divergences can highlight the risks and uncertainties associated with a firm's ESG performance, potentially undermining its capacity and effectiveness in green innovation.This paper aims to explore the impact of ESG rating divergence on corporate green innovation, focusing on how these discrepancies may inhibit a firm's resources, such as financial, human, and technological assets, thereby affecting their ability to innovate sustainably.
According to the resource-based view, achieving green innovation within a corporation necessitates significant investment in a variety of resources, including financial capital, human resources, technological resources, and knowledge resources.ESG rating divergence can act as a significant barrier to corporate green innovation.Discrepancies in these ratings amplify perceived risks and uncertainties, complicating a firm's ability to secure financing.Banks and financial institutions may see companies with inconsistent ESG scores as entities with higher risks, which can lead to increased borrowing costs or restricted access to essential green financing.Additionally, these discrepancies can undermine employee confidence in their organization's commitment to sustainability.This erosion of trust can hinder the attraction and retention of top talent, particularly individuals who prioritize environmental values in their workplace.Moreover, the uncertainty fostered by divergent ESG ratings discourages investment in research and development for new green technologies.Thus, ESG rating divergence directly affects a company's capability and willingness to innovate in green technologies, ultimately impeding progress towards sustainable development goals.
This paper delves into the nuanced dynamics between ESG rating divergence and green innovation within China's A-share non-financial public companies from 2009 to 2022.The findings reveal a substantial inhibitory effect of ESG rating divergence on green innovation, primarily mediated through increasing financing constraints, diminishing human capital quality, and curtailing R&D investment.Further, this paper identifies that the adverse impact of ESG rating divergence on green innovation is significantly modulated by industry competition and corporate ownership structures.Notably, the negative effect is more pronounced in companies operating within less competitive sectors and non-state-owned enterprises.Furthermore, the analysis categorizes companies into three groups based on ESG rating divergence.It finds that in the group with a high ESG rating divergence, the level of green innovation significantly decreases.In the group with low ESG rating divergence and low ESG ratings, green innovation levels remain largely unaffected.However, in the group with low ESG rating divergence and high ESG ratings, the level of green innovation is notably enhanced.
These insights suggest that policymakers should enforce unified standards and require full transparency of rating methodologies and data sources to enhance ESG ratings' consistency.Additionally, the government could bolster support for green innovation through fiscal incentives and the development of green financial instruments such as green credits and bonds.Companies are encouraged to invest in training programs that increase employee engagement in sustainable practices, promoting a culture of innovation that supports enhanced ESG performance.This integrated approach not only clarifies the pathways through which ESG rating divergence impacts green innovation but also frames actionable strategies for stakeholders to mitigate these effects and foster sustainable corporate growth.